As CloserStill potentially nears a sale, Phil Soar, executive chairman and CEO, looks back on a year of big deals and ponders what the future might hold.
It has been the year of private equity and of previously unthinkable sums being spent on trade show assets.
Looking at the year as a whole, we had UBM being sold to Informa, a deal valued at a mere £3.9bn, the NEC was £800m, Ascential to ITE was £300m, Clarion bought Pennwell, which was another £300m, Comexposium – owned by St Paul’s-based Charterhouse – have put themselves on the market at a likely price of circa £1bn plus. And you’ve still got outstanding CloserStill and Mack Brooks, which will probably top £600m between them. And Clarion/Blackstone only just misses the cut, coming at the end of 2017.
Add those numbers up and they come to a bit shy of £7bn (yes, £7bn in real money) – who thought they worked in such a valuable industry (you could buy 35 Neymars or Mbappes for that – or Manchester United, Liverpool, Arsenal and Spurs and still have change).
The question regularly asked is: ‘Why is so much being spent now?’ But that is the wrong question – the real question is ‘Why didn’t private equity cotton onto a business in which the main players make 30 percent-plus margins (and get the cash in upfront) much earlier?”
What we see today is the fact that private equity is going through a phase of having discovered how valuable trade shows are (some did it far earlier – Providence and NVM were buying trade shows 15 years ago). It has seen how successful and how incredibly profitable and stable trade shows are, and what great investment vehicles they can be if run well. There is an argument that this is 25 years late (Blenheim went to UBM for £600m in 1995), but they are prepared to pay for what appear to be very strong and stable assets.
Will this continue? One should never say never, and one should never attempt to predict inflexion points in the markets.
But I spend much of my life talking to private equity companies and the perception in that world, and in the world generally, is that we may be close to the point where investors become a little more cautious. That doesn’t necessarily mean paying less, but it probably does mean being more selective about where they invest. That’s what everyone said two years ago, of course. Everyone was wrong then; money remains very cheap and there remains a genuine flood of it. But if you blend the major stock market indices (S&P, FTSE, Emerging Markets etc) they have fallen circa eight percent so far this year. And look at London, New York and Sydney house prices…
There is a common misperception in newspaper comment that this reflects ‘consolidation in the trade show market’. I don’t see this as being the case. Most of the deals we’re talking about aren’t consolidation at all. Informa and UBM is a sort of consolidation, but most of the others are strong businesses – Clarion, Comexposium, Mack Brooks, CloserStill, NEC, ITE – which are not being consolidated but are being heavily further invested in. The names of some of the investors may change, but the companies do not and their management generally remains in place – Simon and Russell at Clarion, Paul and Kathryn at the NEC etc.
I don’t think any of this activity means that we are heading for a world where all exhibitions are owned by only Reed, Informa and Blackstone. Fully 92 per cent of the world’s exhibitions are still not owned by one of the major exhibition groups.
Blackstone’s investment in the NEC and Clarion
Blackstone is the biggest private equity/investment firm in the world in the sense that it has more funds under management than any other comparable institution (to be precise, $457bn in September 2018). In private equity it does all sorts of things; it’s a very big financial institution. (The NEC deal – even at £800m – represents less than one quarter of one percent of their asset base). The NEC has been bought by the property arm, which is a rather different investor from what you might call their PE arm, which is the part that bought Clarion.
It’s important to emphasise that it’s not the same people who have bought the NEC who have bought Clarion. However, having said that, it doesn’t mean that at some point in the future someone at Blackstone won’t say, ‘We’ve got Clarion, we’ve got Global Sources, we’ve got the NEC – what about packaging them all together and doing an IPO?’. If you own that business you’re not going to sell it, you’re going to float it. I could see that being quite attractive and someone at some point is bound to suggest it. Whether it actually happens – we don’t know. I spend my life being wrong about things.
With property investment (good though the NEC Group is) you can’t generate the same kind of cash-flow or the same kind of margins as a trade show organiser. But the NEC today is particularly unusual because of HS2. The NEC is a big, big site and the HS2 interchange is going to be just next door, and it’s going to be connected directly to the whole NEC complex. When HS2 is close to operating, you can imagine large numbers of apartment blocks being built on the basis that you’re only 40 minutes from Euston but you can still live in rural, idyllic Warwickshire. Not to mention that, if you live in North London, getting to Birmingham Airport will be a lot quicker than getting to Heathrow.
The NEC is likely to look very different in ten years’ time – one of the most exciting changes we will see in our lifetimes. I look forward to it.
This article originally appeared in the December 2018 issue of Exhibition News.